Deutsche Bank AG has announced a projected €430 million boost to its third-quarter results, attributed to significant progress in resolving its long-standing Postbank litigation. The German bank reached settlements with more than 80 plaintiffs, accounting for nearly 60% of the total claims. The agreements, finalized at €31 per Postbank share, are expected to release provisions previously set aside, thereby enhancing the bank’s pretax profit for the quarter.

Details of the Settlement

The settlements reached involve about 45% of the provisions Deutsche Bank had allocated for these claims. This includes a major settlement with the largest individual plaintiff, representing approximately one-third of the total claims. The remaining provisions related to these settling plaintiffs will be released, contributing a €430 million boost to Deutsche Bank’s third-quarter pretax profit.

Background of the Litigation

The Postbank litigation is one of Deutsche Bank’s most protracted legal issues. Claimants argue that the bank should have offered a higher price for Postbank shares during its successful takeover bid in 2010. Initially, Deutsche Bank offered €25 per share, but claimants believe it should have been €57.25, based on the share price when Deutsche Bank first invested in Postbank in 2008. Some investors are seeking compensation up to €64.25 per share, though recent offers have been rejected as insufficient.

Financial Implications

In April, Deutsche Bank set aside €1.3 billion to cover potential losses from this litigation after an appeals court hinted at a possible unfavorable ruling. This provision led to the bank’s first quarterly loss in four years and paused its share buybacks. With the recent settlements, the bank is expected to release these provisions, enhancing its financial performance and potentially increasing capital returns to shareholders.

Analyst Insights

Bloomberg Intelligence analyst Alison Williams noted that while uncertainty remains, Deutsche Bank’s settlement with over 60% of claimants — at a more favorable rate than initially anticipated — could lead to increased capital returns to shareholders. The bank is expected to maintain a cautious approach to buybacks for now, with potential upside for capital returns anticipated in late 2024 to early 2025.

In summary, Deutsche Bank's progress in the Postbank litigation offers a positive outlook for its financial performance in the third quarter, with significant implications for its capital management and shareholder returns.

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